Income Tax Appellate Tribunal - Chennai
Shri. Tuhin T Mehta, Chennai vs Acwt Non Corporate Circle 2 , Chennai on 20 January, 2021
आयकर अपीलीय अिधकरण, 'सी' यायपीठ, चे ई
IN THE INCOME TAX APPELLATE TRIBUNAL , 'C' BENCH, CHENNAI
यायाधीश ी पी पी भ , अ य एवं ी जी. मंजुनाथ, लेखा सद य के सम
BEFORE SHRI JUSTICE P.P. BHATT, PRESIDENTAND
SHRI G. MANJUNATHA, ACCOUNTANT MEMBER
धनकर अपील सं./WTA Nos.: 49 & 50 / CHNY / 2018
िनधारण वष / Assessment Years: 2006-07 & 2007-08
Shri Rohan T. Mehta, The Asst. Commissioner of
Flat No.5, Kleen Villa, v. Wealth Tax,
1/4, Kothari Road, Nungambakkam, Non-Corporate Circle-2,
Chennai - 600 034. Chennai - 34.
PAN : AAKPM2740F
(अपीलाथ /Appellant) ( यथ /Respondent)
धनकर अपील सं./WTA Nos.: 51 & 52 / CHNY / 2018
िनधारण वष / Assessment Years: 2006-07 & 2007-08
Shri Tuhin T.Mehta, The Asst. Commissioner of
Flat No.5, Kleen Villa, v. Wealth Tax,
1/4, Kothari Road, Nungambakkam, Non-Corporate Circle-2,
Chennai - 600 034. Chennai - 34.
PAN : ACLPT3431F
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से/Appellants by : Shri N.Arjun Raj, CA for
Shri S.Sridhar, Advocate
यथ क ओर से/Respondent by : Shri G.Johnson, Addl.CIT
सन
ु वाई क तार ख/Date of Hearing : 09.12.2020
घोषणा क तार ख/Date of Pronouncement : 20.01.2021
आदे श /O R D E R
PER G MANJUNATHA, AM
These bunch of four Wealth Tax appeals filed by two different assessee's are directed against separate, but identical 2 W.T.A. Nos.49 to 52/CHNY/2018 orders of the Commissioner of Wealth Tax (Appeals)-2, Chennai dated 28.02.2018 and pertains to the assessment years 2006- 07 and 2007-08. Since facts are identical and issues are common, for the sake of convenience these appeals are heard together and are being disposed of by this consolidated order.
2. Both the assessee's have raised common grounds of appeal in their respective memorandum of appeal. Therefore for the sake of brevity, grounds of appeal filed in WTA No.49/CHNY/2018 for the assessment year 2006-07 are reproduced as under:-
1. The common order of The Commissioner of Wealth - Tax (Appeals)
- 2, Chennai dated 2802.2018 in WTA Nos.1&9/2014-15/A.Ys2006-07 & 2007-08/CIT(A)-2 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
2. The CIT (Appeals) erred in confirming the order of re-assessment which order was passed without adhering to the prescription of law and consequently erred in sustaining the revised computation of net wealth without assigning proper reasons and justification.
3. The CIT (Appeals) failed to appreciate that the order of re-
assessment under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.
4. The CIT (Appeals) erred in bringing to tax the value of 200 cts of diamonds, valued at Rs.50 Lakhs in the recomputation of taxable net wealth without assigning proper reasons and justification.
5. The CIT (Appeals) failed to appreciate that the misreading of the MOU/ family arrangement and the civil litigation initiated in relation thereto would vitiate the decision in including the diamonds as part of the assessable net wealth.
3 W.T.A. Nos.49 to 52/CHNY/2018
6. The CIT (Appeals) failed to appreciate that in any event the valuation of such diamonds at Rs50 Lakhs was wholly unjustified and ought to have appreciated that the fair market value as on the valuation date upon taking into consideration the pending dispute while ignoring the rules of valuation was determined and included without proper reasons and materials.
7. The CIT (Appeals) went wrong in recording the findings in this regard in para 9 of the impugned order without assigning proper reasons and justification
8. The CIT (Appeals) erred in sustaining the inclusion of the value of other silver and jewellery items as part of the assessable net wealth without assigning proper reasons and justification.
9. The CIT (Appeals) failed to appreciate that the inclusion of the value of such items was bad in law and alternative ought to have appreciated that the value assigned for inclusion in the computation of net wealth was wrong on various facets.
10. The CIT (Appeals) erred in not considering the claim of tax exemption u/s 5(1)(vi) of the Act and ought to have appreciated that the rejection of the said claim by the Assessing Officer was wrong, erroneous, unjustified, incorrect and not sustainable in law and in any event ought to have appreciated that the valuation of the house property for inclusion of such value in the computation of net wealth was wrong on various facets.
11. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.
12. The Appellant craves leave to file additional grounds/arguments at the time of hearing.
3. The brief facts of the case are that the assessee has filed his return of wealth for the assessment year 2006-07 on 06.09.2006 declaring taxable wealth of Rs.16,12,100/-. The assessee had not filed his return of wealth for the assessment 4 W.T.A. Nos.49 to 52/CHNY/2018 year 2007-08. The assessments have been, subsequently reopened u/s.17 of the Wealth Tax Act, 1957 (hereinafter 'the Act') for the reasons recorded as per which wealth chargeable to tax had been escaped assessment. Accordingly, notice u/s.17 of the Act dated 18.09.2012 has been issued and served on the assessee. In response to the notice, the assessee vide his letter dated 06.02.2014 informed that original return filed may be treated as return filed in response to the notice. The case has been taken up for scrutiny and during the course of assessment proceedings the AO noted that consequent to death of Shri. Tushar Mehta, father of assessee, a MOU cum Deed of family settlement dated 13.01.2006 was entered into between family members including the assessee. As per the said MOU cum Deed of family settlement, certain business assets and non-business assets were distributed between the parties of the first to third part i) Vaidehi, ii) Tuhin T. Mehra, iii) Rohan T. Mehta and accordingly the assessee has received assets including a residential property at Mc Nichols Road, diamonds valued at Rs.50 lakhs from Mehta Diamond Trust and certain gold jewellery. Out of the assets distributed as per MOU, the assessee has offered to wealth tax value of jewellery and silver 5 W.T.A. Nos.49 to 52/CHNY/2018 articles, but not offered residential property at Mc Nichols Road and diamond valued at Rs.50 lakhs receivable from Mehta Diamond Trust. During the course of assessment proceedings, the AO called upon the assessee to explain as to why residential property at Mc Nichols Road and the diamond receivable from Mehta Diamond Trust cannot be included in the taxable wealth, since the same has been received in pursuant to MOU cum Deed of family settlement dated 13.01.2006. In response, the assessee has filed a copy of plaint filed before the Hon'ble High Court of Madras in CS No.574 of 2013, seeking to declare the MOU cum Deed of family settlement as null and void and non-est in law and therefore, the assessee is not liable to include the residential property at Mc Nichols Road and diamonds receivable from Mehta Diamond Trust because both assets have not been given to the assessee as per the terms of MOU cum Deed of family settlement. The AO, however was not convinced with the explanation of the assessee and according to him, since the assessee has entitled to receive various assets including residential property and diamonds on execution of the MOU and therefore the same needs to be included in taxable wealth and accordingly brought to tax residential property at 6 W.T.A. Nos.49 to 52/CHNY/2018 Mc Nichols Road and value of 200 Cts diamond amounting to Rs. 50,00,000/-
4. Being aggrieved by the assessment order, the assessee preferred an appeal before the CWT(A). Before the CWT(A), the assessee has challenged inclusion of residential property at Mc Nichols Road on the ground that said property was used for the purpose of residence and hence the same is exempted u/s.5(1)(vi) of the Act. The assessee has also challenged valuation adopted by the AO on the ground that the AO ought to have followed the method of valuation prescribed under Schedule III to Wealth Tax Act, whereas he has arrived at the value on the basis of market value which is incorrect. The assessee has also challenged the additions made towards residential house property and diamonds in light of plaint filed before the Hon'ble High Court of Madras, seeking to declare the MOU cum family settlement deed as null and void on the ground that his family members did not handover the assets assigned to the share of the assessee as per the terms of MOU cum family settlement deed. The ld.CWT(A) after considering relevant submissions of the assessee observed that as per the 7 W.T.A. Nos.49 to 52/CHNY/2018 MOU cum family settlement deed dated 13.01.2006 entered between the parties, the non-business assets have been distributed among the parties as per which the assessee is entitled to receive certain assets including residential property at Mc Nichols Road and diamonds from Mehta Diamond Trust and therefore the contention of the assessee that there is a family dispute and the assessee has not received the assets as per the terms of MOU cannot be accepted. The CWT(A) further noted that once MOU has been entered and assets have been distributed, the assessee has become owner of such assets and consequently those assets are subject matter of wealth tax unless the same are exempt under the Act. Therefore, he opined that there is no error in the findings recorded by the AO to tax residential house property at Mc Nichols Road and diamonds received by the assessee as per the terms of MOU. Aggrieved by the CWT(A) order, the assessee is in appeal before us.
5. The ld.AR for the assessee submitted that the ld.CWT(A) erred in confirming additions made by the AO towards residential property at Mc Nichols Road and value of diamonds, 8 W.T.A. Nos.49 to 52/CHNY/2018 even though the assessee has filed necessary evidences including copy of plaint filed before the Hon'ble Madras High Court challenging the operation of family settlement deed and further proved that the assessee has not received the assets as per terms of MOU cum family settlement deed dated 13.01.2006. The ld.AR further submitted that AO as well as CWT(A) have erred in arriving at a conclusion that by entering into MOU cum family settlement deed, the assessee is entitled to receive assets ignoring the fact that the very same MOU cum family settlement deed was challenged before the Hon'ble Madras High Court, because the assessee has not received his share of assets in terms of said MOU. The ld.AR for the assessee further submitted that without prejudice to the above arguments, even assuming for the moment the asset is liable to be taxed, but fact remains that the residential property at Mc Nichols Road is used for own residence and hence the same is exempted u/s.5(1)(vi) of the Act and consequently cannot be included in taxable wealth.
6. The ld.DR on the other hand strongly supporting the order of the CWT(A) submitted that it is a matter on record that 9 W.T.A. Nos.49 to 52/CHNY/2018 the assessee is a party to MOU and has per said MOU the assets have been distributed among its family members and hence there is no merit in the arguments of the assessee that he is not owner of the assets as on the date of valuation, because said MOU is challenged before the Hon'ble Madras High Court. The ld.DR further submitted that what is important to bring a particular asset to tax is whether the assessee is owner of said asset or not and said asset comes within the definition of asset as defined u/s.2(ea) of the Act. Since the assessee become owner of the asset by virtue of settlement deed, he cannot claim that he is not owner of said asset merely because the MOU is challenged before the court. The ld.DR further submitted that the assessee has failed to file any evidences to prove that the property in question was used for own residence and hence AO was right in including said property under taxable wealth.
7. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The AO has included residential property at Mc Nichols Road and value of diamonds received from Mehta 10 W.T.A. Nos.49 to 52/CHNY/2018 Diamond Trust in pursuance of MOU cum Deed of family settlement dated 13.01.2006 entered in to between assessee and his family members, as per which the assessee has received residential property at Mc Nichols Road and 200 Cts diamonds valued at Rs.50 lakhs from Mehta Diamond Trust. It was contention of the assessee before the AO as well as CWT(A) that although the assessee is a party to MOU cum family settlement deed, the asset distributed in pursuance to said family settlement deed has not been handed over to the assessee by his family members and because of this, the assessee has filed a plaint before the Hon'ble Madras High Court in CS No.574 of 2013, seeking to declare the MOU cum Deed of family settlement as null and void and non-est in law and, therefore said assets cannot be included in the taxable wealth for the impugned assessment years. We have gone through the findings recorded by the ld.AO as well as ld.CWT(A) in light of various evidences filed by the assessee including plaint filed before the Hon'ble High Court of Madras in CS No.574 of 2013 and found that the bone of contention before the Hon'ble High Court is distribution of assets including diamonds receivable from Mehta Diamond Trust. We further 11 W.T.A. Nos.49 to 52/CHNY/2018 noted that as per the plaint filed by the assessee before the Hon'ble High Court, the assessee has challenged the MOU cum Deed of family settlement on the main ground that he did not receive assets distributed in pursuance of said MOU cum family settlement deed. Once MOU cum family settlement deed is the basis for distribution of asset among family members and such MOU cum family settlement deed is challenged before the Hon'ble High Court of Madras seeking to declare the MOU cum family settlement deed as null and void and non-est in law, then the same cannot be considered as a document conferring title and interest in the properties to the assessee to declare the assessee as owner of said assets. Further, unless the assessee becomes owner of the asset as on the date of valuation of wealth, then the same cannot be included in the value of taxable wealth for taxation. In this case, on perusal of facts, we find that although assets have been distributed among the family members in pursuant to MOU cum Deed of family settlement, but the contention of the assessee before the Hon'ble High Court is that he did not receive said assets. We, therefore, considering facts and circumstances of the case, are of the opinion that AO as well as CWT(A) were erred in 12 W.T.A. Nos.49 to 52/CHNY/2018 assessing the value of residential house property and diamonds for taxation for the impugned assessment years without taking into account the dispute pending before Hon'ble High Court of Madras.
8. As regards residential property at Mc Nichols Road, the claim of assessee that said property was used for own residence and consequently outside the purview of definition of asset as defined u/s.2(ea) of the Act. Although, the assessee claims that said property was used for own residence, but no evidence has been placed before the authorities or even before us to prove that said property was used for own residence. No doubt, in case the property is used for own residence then the same is exempt u/s.5(1)(vi) of the Act. But, it is for the assessee to prove with necessary evidence that said asset is used for own residence. In this case, the assessee has not placed any evidence on record to justify his stand. Therefore, we are of the considered view that the issue needs to be re- examined by the AO in light of claim of the assessee that said property is used for own residence.
13 W.T.A. Nos.49 to 52/CHNY/2018
9. In this view of the matter and considering facts and circumstances of this case, we are of the considered view that the appeal filed by the assessee needs to go back to the file of the AO to ascertain the claim of assessee in light of plaint filed before the Hon'ble High Court of Madras regarding value of diamonds. Further, regarding residential property at Mc Nichols Road, the same needs to be re-examined by the AO in light of claim of the assessee that said property was used for own residence. Hence, we set aside the appeals filed by the assessee for both assessment years 2006-07 & 2007-08 to the file of the AO and direct him to re-examine the issue regarding above two assets in light of various averments made by the assessee in accordance with law.
10. In the result, appeals filed by the assessee for the assessment years 2006-07 and 2007-08 are treated as allowed for statistical purpose.
11. WTA Nos.51 & 52/CHNY/2018 The facts and issues involved in these two appeals filed by the assessee are identical to the facts and issues which we had considered in WTA Nos.49 & 50/CHNY/2018 in the case of 14 W.T.A. Nos.49 to 52/CHNY/2018 Shri Rohan T. Mehta for the assessment years 2006-07 & 2007-
08. The reasons given by us in preceding paras shall mutatis mutandis apply to these two appeals as well. Therefore for similar reasons, the appeals filed by the assessee for both the assessment years are set aside to the file of the AO and direct him to reconsider the issues in light of the observations given herein above in the case of Shri Rohan T.Mehta in WTA No.49 & 50/CHNY/2018.
12. In the result, the appeals filed by both the assessees for the assessment years 2006-07 & 2007-08 are allowed for statistical purpose.
Order pronounced on 20th January, 2021 at Chennai.
Sd/- Sd/-
( यायाधीश पी पी भ ) (जी. मंजुनाथ)
(Justice. P. P. Bhatt) (G. Manjunatha)
अ / President लेखा सद य /Accountant Member
चे ई/Chennai,
th
दनांक/Dated, the 20 January, 2021
RSR
आदेश क ितिलिप अ ेिषत/Copy to:
1. अपीलाथ /Appellant 2. यथ /Respondent 3. धनकर आयु (अपील)/CWT(A)
4. धनकर आयु /CWT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF.